The aim of this study was twofold; first we wanted to examine if there were actual differences in mental health problems between children with immigrant and Swedish background. Second, we wanted to examine the impact of neighborhood disadvantage, peer status, and family circumstances on mental health problems among children with immigrant background, as well as the association between ethnicity, level of neighborhood disadvantage, and contacts with Psychiatric Child and Youth Clinics. Multilevel analyses, using HLM 6.0, were carried out on data relating immigrant children’s mental health and contacts with psychiatric clinics to neighborhood characteristics. Results indicate that immigrant children tend to have more mental health problems than Swedish children, and factors related to the individual’s childhood family situation explain a considerable part of the differences. No significant differences in mental health problems were found between neighborhoods. The data used in the analysis are drawn from (1) the Swedish longitudinal database Project Metropolitan which consists of a cohort of approximately 15000 children born in 1953 and living in the Stockholm metropolitan area in 1963 and (2) The Stockholm Child-Psychiatric database containing approximately 20 000 children (including matched controls). Further research is needed on how social settings beyond the neighborhood can have an effect on children’s mental health, antisocial behavior, and well being.